OUTcomes from our latest investment committee

Back to Money advice
5 June 2018
Our investment committee meets every quarter to evaluate the performance of the investment funds. We do this to ensure they are structured in the best possible way to help you achieve your investment goals.
 
Here are our views on the past quarter:

Our funds:

You may have seen a small drop in the value of your investments with us over the last three months. Both the South African and overseas shares (shares in companies listed on the Johannesburg Stock Exchange and overseas stock exchanges) have delivered negative returns over the last three months to the end of March 2018.

The Rand has strengthened against the US Dollar, partly as a result of Ramaphoria (the excitement around our new President) and the moves by President Donald Trump (the Donald) in the US to kick off a trade war between him and China. In short, “the Donald” wants to put up trade tariffs on certain Chinese imports in the US.

This is not good news for both China and the US as the cost of doing business could rise significantly and hurt businesses and consumers.

Our funds have done very well versus their competitors, mainly as a result of their low cost and efficiency. It’s important to note that over shorter periods you should expect that our funds, in fact almost any funds, may drop in value.

This is part of investing. When we developed our advice systems, we used 115 years of historic data to try and ensure that you are in the right fund for your financial situation and time horizon.

It’s the economy!  

The Ramaphoria from December is translating into action. Corporate governance has improved at Eskom, SARS and Denel. Appointing Pravin Gordhan and Nhlanhla Nene as the Minister for Public Enterprises and Finance respectively was a masterstroke.

Growth in Gross Domestic Product (loosely translated as Economic Growth) is also better than expected. But it’s going to take a long time before we get back to levels of economic growth that are high enough to meaningfully reduce unemployment. The rising VAT and Petrol price really hurt consumers and with the low inflation (inflation is otherwise known as CPI – or Consumer Price Inflation. The latest figure is just 3.8%) we wouldn’t get our hopes up for huge salary increases this year.

Also, South Africa is still considered investment grade (in other words the South African Government can borrow money quite cheaply) but we really are hanging on by our fingernails here.

The markets:

The 40 largest shares on the Johannesburg Stock Exchange, known as the FTSE/JSE Top 40, was down close to 6% over the last 3 months to the end of March 2018.

Many of the 40 largest companies in South Africa actually have much of their operations overseas and when the South African rand gets stronger, it tends to hurt the share prices of these companies.

Listed property companies have had an even tougher time, the SA Listed Property Index was down 20% over three months to the end of March 2018, partly because investors are starting to realise that many of the listed property companies own pieces of each other and they weren’t exactly sure what they were buying.

In addition, the change in the economic environment has meant that some of these companies’ share prices seem too high, and so investors have been selling listed property companies.

Bonds (loans to governments) have been performing well – mostly as a result of the improving SA political environment, which helped to stop Moody’s from downgrading us.

Currencies:

Over the last three months the rand has been very strong for two reasons. Firstly, because of Ramaphoria, and secondly because the Donald’s talk about trade sanctions has meant that investors are all selling the US dollar. This means the Rand gets stronger against the US Dollar.

We hope this gives you a quick summary of some of the important events rocking our world.

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